FDI in retail: Is India really ready ?
The UPA government's latest announcement regarding FDI in India has brought much opposition and criticism from the allies and the Trinamool Congress, on allowing foreign direct investment in multi brand retail sector. Question is, Is India really ready and geared up for the after effects ? Or is the Government taking hurried decision based on the success of FDI in other countries such as China , Brazil and Indonesia to name a few. The allies and the TMC are up in arms against the decision, and some like Tamil Nadu Chief Minister J Jayalalitha vowing to physically stop the retail chains to open in the state if needed.
There are several theories on this heated issue. Some say, allowing FDI in the country will destroy business propositions for the local 'kinara' or general store, and retail stores will fail against the foreign retail giants. On the contrary, if looked at properly the local retailers and wholesalers might benefit from filling their requirements from these retail outlets at discounted prices. Countries like China where there is a strong backup such as the manufacturing sector, where workers can fall back on FDI might have worked. But for it to work in India we need to strengthen our manufacturing sector and bring it at par with countries like China. For a start the Government can implement FDI in few major cities in India and see its implications and then slowly expand it to other regions of the country.
The Government on 24th November decided to allow 51% FDI in multi brand retail and also removed the cap from single brand retail sector. Stating advantages such as increased employment, as much as 10 million new jobs for the farmers as a direct advantage of allowing FDI. Many speculate that the state farmers will be exploited by these retail giants and lose their fields and jobs to these foreign investors. The Government on the contrary strongly believes that nothing of this sort will take place and instead "farmers will receive better remuneration for their produce" .
UP state head Mayawati has made it clear that her state would not grant licenses to these foreign retail giants in order to protect the millions of workers and farmers engaged in the farming and retail sector. Trinamool Congress leader, Mamata Banerjee also showed strong resentment against this move by the Government and has asked the Centre to reverse the decision. However, the ultimate decision of granting trade licences rest with the state governments. So how much of this will be implemented all over the country is yet to be seen.
Commerce and Industry Minister Anand Sharma hopes that the State Governments will welcome this change and allow foreign retail chains to establish themselves in the country. He also sympathized with farmers and workers in those states were licences will mostly likely be not granted.
With the Government facing the heat from all directions including Anna Hazare's impending Lokpall Bill which is to be settled by the winter session in the Parliament, it is to be seen how things unfold.
